DORM - Earnings call transcript Q3 2024

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Operator

Good morning, and thank you for standing by. Welcome to the Dorman Products Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I would now like to turn the conference over to Alex Whitelam, Vice President of Investor Relations and Risk Management. Thank you, sir. ahead. go Please

Alexander Whitelam

Officer. morning, followed Earnings Good for Dorman's to Third After review open Chief Dorman's Executive update, we'll a Thank David that, closing then Call. everyone. remarks I'm questions. XXXX will Financial Dorman's Hession, Conference and quarterly Olsen, call will joined Quarter provide Officer; business results you. the David Welcome Kevin by by the Chief Kevin. Kevin from

call our now, website are presentation, should earnings access release By Relations at our which to on of earnings Investor everyone the available and have portion dormanproducts.com.

I to federal earnings of forward-looking Before would we prepared presentation within our statements everyone securities remarks, laws. begin, and include investor like remind meaning that the release

in important recent release actual forward-looking We those and and earnings assumptions, our material results XX-K from anticipated advise that in to cautionary described most to the listeners XX-Q, may for review and risk expectations such factors factors materially cause differ statements statements. and

non-GAAP these website. release presentation, and contained which appendix We'll attached found of earnings in our measures. are Investor be also this section the earnings to Relations to Reconciliations in the measures can to reference non-GAAP the in Dorman's directly GAAP of both certain schedules comparable most of call measures the

the they Finally, additional participants today's question if that, during rejoin questions. the X call, Q&A And portion that over themselves have turn limit and I'll queue of call Kevin. the to we ask with follow-up with to X

Kevin Olsen

Thanks, joining third Good our quarter XXXX Alex. and earnings call. thank morning for you

differentiating how with growing of our competencies spend I'll the of highlights a our and next-generation complex in overview electronics set then start itself solutions some Dorman quarter, of provide also with I'll space. an within results. mentioned, is of Alex time discussing suite a As the segment performance

you're in along if deck. Slide to the X, Turning following

same net line increase this sales carried operating adjusted diluted the leading top growth significant Consolidated a inflationary Our quarter year. product the EPS. operating third the from productivity in year-over-year to compared returns easing higher period margin points million. have in discussing to quarter, improved solid the basis $XXX positive we with along throughout that momentum XX.X%, been to on the through and Margins Adjusted year. last and increased expanding expansion sales, XXX initiatives and favorable X.X% new with mix year margin pressures was

during a year's third to million $X.XX. As debt XX% $XX solid last cash repay $XX of shares repurchased million EPS Free to flow diluted quarter. result, adjusted allowing million, and over the increased at us was $XX our of quarter

as the moment. cover year. outlook as year-to-date our the narrowed earnings visibility guidance our for David positive results our and we've ranges into guidance in our will well and Given fourth sales quarter, increased a

X. Slide to Moving

me the with mid-single highlighted positive Vehicle were miles some the solid, the was half provide we've year-over-year. to X in continued of year digits POS observations and segments. customer first segment, trends quarter Duty traveled Let again same up Light In across the the shipments. our our low in generally in consistent third quarter. higher

the automation to operational discussed business call. our growth, and in due last which Duty was efforts Light Our efficiency profitability partially delivered we

continue to we Finally, geographic exposure. base supplier diversify our and

last key team nice supply the the a and job This remains few done over reorienting area a focus has chain business, the the for years.

margin Heavy initiatives. drove improvement we experience our productivity year-over-year cost the to solid While business quarter, and Duty during pressure savings market continued in profit segment

customer across inflection the recent remains in segment are signaling positive market that base. but we're signs growth Predicting our seeing stabilization freight indicators a Additionally, difficult, industry. in

year-over-year. its Specialty profit segment's Our Despite segment Specialty compared flat net margin persisted. were Vehicles market challenges, Vehicle to last year's third sales headwinds as quarter increased these

cuts. machine in forward, forecasted Looking connection with the borrowing Fed anticipate new increase are rates reduced demand we rate seeing customer if

along parts, offerings, product new versus repair expansion initiatives enhanced the with overall of higher nondiscretionary Vehicle driving our Specialty Additionally, sector. dealer including are outperformance a mix

creating control electronics become X, vehicle more On across time capabilities complex. growth our an early were It's that have spend we'll our part, trend, in components how with describing were mechanical some integrated Slide our into opportunities releasing previously what vehicles systems. serve secret segments. fuel complex increasingly pump simple Electronic a the this are investor we no XXXX. We driver in module first electronic

in continued Since to on our categories. and we difficult-to-address safety XXXX. that technicians acquisition develop in ensure proliferation functionality investments innovative, deepened differentiated The long Systems including complex our over us launch, that which the rely regularly invest how question of Flight is impact electric performance. of we improve continued set systems vehicles of Today, a our to to have vehicles capabilities hybrid electronics business highly have electronic get have capabilities allow and solutions These business repair the our often these and will and critical term. that end-user for technical we

various agnostic the Simply across technologies deployed to us see developed. growth as put, opportunities we our significant and capabilities powertrain diverse be being propulsion truly allow

up the into in X- to XXXX. Dorman's vehicles approximately with Our VIO, sweet accelerate offers North multi-platform over XX% are the expected ICE Dorman car According park American Suppliers platform MEMA through flexibility are remain and well with to time. future. approach matures majority engines expected to as projections, of ICE to Vehicles each to XX-year-old optionality of collaboration the growth Aftermarket Strategy& spot make the the vast

This including adding of provides a for us long set portfolio electronics to runway this our new of complex vehicles. solutions with aftermarket continue leading to

vehicles the efficiency way their spot. innovation will drive and aftermarket. we opportunity car expect more to Hybrid fuel increased OE continue our park thus made sweet and into safety system already changes for Additionally, further have regulations in provide

models have portfolio today. a of servicing solid We solutions those

a their offer dual platforms. more technology, expansion Dorman becoming future opportunity powertrain of category given with seeing broader growth And customers anticipate we for with systems. Hybrids hybrid comfortable hybrid

the and some vehicles models. their electric portion investment OEMs of smaller in wavered a have on today While EV are park of level recently

develop platforms to innovation we've continue new will technology for applied same the and with have We EV historically. strategy

EV the vehicle. value more long-term on as driving nearly deployed electronic even dependent across company activity to control this platforms Electronic and see the parts. sense every complex are modules for we Again,

higher replacement failure higher Today, electronic and rates thousands our expect of ICE, potentially have SKUs costs these new electric systems across support vehicles. to we in We units systems. hybrid X business with and

are challenges new ideation constantly and innovative engineering opportunities development product and and vehicles. tomorrow's OE today's support Our growth teams designing new complex and to components, solutions solve including increasingly fixed in

approach long-term will value expect We drive this for stakeholders. our multi-platform sustainable

let me some Now detail on capabilities. our on additional X, Slide differentiated provide

launched electronics of new excellence product a XXXX, expertise into cross-functional development in build As electronic innovation to to development importance, engineering and we grew and aggregate group to and the done single an job strategic opportunities its center our the aftermarket capabilities group. electronics needed In business we an to next-generation the accelerate size its expand need of portfolio. and Dorman infrastructure driving recognize solutions. evaluating has for stand-alone product This outstanding

begin as we process identifying provide products. perspective, points failure points process specialists the throughout of a other our they're it are network we the From seeing would motivated not with us But assessing systems, in break differentiation to and our log write you imagine, undertake and for vast and with field. more expertise. and components then the improvement. unlike with code Data is who technicians of is and thousands on lies. the own technical design our processing trials tests compatibility a logging and analyze data, teams our and to proprietary our requires Through where run codevelopment various software our specialized or different and electronic This

the competencies set process Finally, is of space. functional aftermarket safety vehicle ensure validation This advantages our advanced in seamlessly software designed systems. the integrates and product competitive leadership that highlights and to the the built into we've Dorman's

We technology expect will contribute platforms. to traditional on these of are complex growth outpace propulsion our long-term electronics to success the especially alternative poised parts, hard advantages as

David hand I'll to QX to that, our performance. off review With financial

David Hession

Kevin. Thanks,

X. Similar this the $XXX up Slide to were net Light sales Turning products in growth was third increased fueled of launched the demand sales by year. quarter, quarter Duty the by to business, driven that was year-over-year. the Consolidated new and X% which million, customer were second

improvement. the the cover Heavy a in businesses Specialty businesses market I'll headwinds our of through each While impacting moment. persisted both segments and drove Duty quarter, margin Vehicle just

we've Gross pressures by driven net prior improvement XX% year. to the for mix of initiatives margin new for percentage operating Adjusted been segments favorable of was and was compared sales quarter This the increase a the executing efficiency period as inflationary our million than period. the throughout sales was last Adjusted a year-over-year same operational year. products, SG&A bolstered expense up flat XX.X%. the was more across compared XXX higher point basis to easing $XX from at by the XX.X%, third income year quarter

operating to gross on expanded margin points XXX largely Adjusted basis XX.X%, improvement. margin

lower our to interest tax the Finally, was to growth. $X.XX, count third with along up quarter period, income, EPS diluted increased and year contributed rate adjusted prior XX% operating compared adjusted expense, EPS share

me and Duty on provide for Net POS the $XXX in on customer Light line each the the Slide of X% updates in were Shipments with our compared year-to-date. with up Light third X. quarter to million sales Duty segments, for quarter, year. last were let generally Next, starting business during quarter

our and in Light significant profit brand growth continue year. drive discussed duty. compared we've As strength for to Segment basis same to points new throughout the QX the last XXX XX% margin products up was year, period the Dorman's of

across and driven margin easing was Similar mix to favorable quarter, driven product cost new by savings operational this initiatives, business. the sales the improvement delivering excellence pressures, last inflationary higher by

As quarter. both and Vehicle well our Kevin segments the mentioned, Heavy continued Specialty headwinds navigated Duty during market

detail X slides. a me the on more bit Let next provide

third net down On Slide to X, last year's Heavy Duty were million, X% $XX sales QX compared quarter.

the was we development positive new points However, the for market was commercialization increasing digits, X.X%, heavy-duty down margin a indicating and up job did basis enhanced segment's XXX broader Heavy profile. Despite quarter. over year's mid-single third yielding our are initiatives lower team sales, last solid that margin Duty roughly results. estimate the Operating that product

from market ], and market difficult significant some remains [ predicting commentary improve. the the it remain market focused that we're success managing as business freight industry We of stabilizing with on capitalizing recessionary for a pleased on long-term the While trend. growth conditions is the recent churn opportunities

initiatives, Vehicles XX Specialty dealer we sector. development were expansion higher at new our Through consumer Net growth in and continued segment. despite headwinds. parts new able market our year-over-year of offset with were the the including Moving nondiscretionary uncertainty product sales to coupled continued softness strategy, rates for sentiment repair $XX our to portfolio, million financing in our flat Slide driving

the continues year-over-year These points margins positive Additionally, profit increasing drive savings segment for resulted cost XXX in the remain business. to higher outlook margin initiatives. to this We XX%. basis team from on

continue in pressures the and consumer space our for to subside we end-user robust. demand interest as As products sentiment increased to expect rate see enthusiasm stabilizes, remains

decline was the cash on with Free was offsetting compared in million flow $XX our lower XX% expenditures. related XX. period capital flow cash The an primarily Slide to down cash to same operating balance, Turning quarter, in inventory to XXXX. the in increase third lower

$XX through strategy allocation average $XX consistent returned and debt per as to price the of at repurchase we capital the approximately remained repaid XXX,XXX million an share. $XX during Our shares of million in shareholders quarter

Dorman's our to a with covering organic existing repurchase stock of XXXX to program this through prudently authorization share repurchase inorganic and our of shares opportunistically, up million the end at investments, repurchase to expiring returning of Additionally, we Along common Directors new of capital with approved year, $XXX shareholders. continue Board XXXX.

us balance long-term strategy well allocation capital Our and to value. position sheet strong drive

our balance XX, liquidity. I'll and cover Slide On sheet

September million lower QX. of was debt million $XXX or $X net XX, than our As

and at last X.XXx June leverage end adjusted from net down was Our the end at of of ratio X.XXx year. X.XXx EBITDA the

of remains and an than Our below of leverage Xx of the well below target our less our acquisition. target year Xx first long-term current comfortably following

at from end was the at total $XXX $XXX million liquidity million our of up the the end quarter Additionally, QX. of

the us balance investments. flexibility we're plan pleased growth Our provides to for remains continue strong, sheet and deploy it our executing and with capital strategic capacity future and

to discuss on to for Turning guidance. and through our expected the Reflecting XXXX. months year, performance X strong like guidance are updating to our the Slide XXXX updated XX. our finish I'd first we

have increase of we XXXX. narrowed X.X% sales, our an to over to net X.X% expectations For

will continue. we As across segments, Light the momentum we that believe Duty's look

in We environment continue macro as and thus XXXX, line and will shipments the far in POS they anticipate remain be positive. have to will

Based Our improve performance businesses our Vehicle to Heavy we remain market. expect year each continue to these results. of driving net on down Duty segments factors, and full positioned well X to compared their solid Specialty sales year-to-date in execution

range a our full representing to and now for range. guidance in adjusted XX% expect XX% narrowed XXXX. the diluted increased we to We to year $X.XX EPS Additionally, $X.XX earnings increase be of over XXXX,

spoke seen electronics we've year, new the strong Throughout including in growth products, that complex of earlier. Kevin

volume higher and sales margin drive their a generally mix. profit carry both favorable profile products higher new Our and

of is market Additionally, processes also global strong automation, This our including to initiatives positive adoption and a investments in across our the yielding are team's testament ability environment. results. to operational and enterprise, navigate challenging excellence sourcing our productivity dynamic, new

their to So dedication thank and like I'd our year. this hard team for work

it to I'll that, conclude. to back Kevin? With turn over Kevin

Kevin Olsen

We've David. the Thanks, like our regarding comments number organization this implemented I'd year. across to a team. of echo changes your

done long-term solutions. upon results innovation put contributors to job and growth place. the year. our Our to have strong, people, through forward our adapting in year. We outstanding improving our an of the investing in committed remain proud we by initiatives over deliver We delivering significant design the growth need and to driving last next-generation We're finishing XXXX look and processes

I like for With the would Operator? up now open to that, call questions.

Operator

MKM. line Scott comes from question Stember ROTH with first Instructions] [Operator the Our of

Scott Stember

just touch first could Duty. Light on Maybe we

about been it but or for even to in some Some of customers continue side the your do you softening me outperform. the have professional business talking guys of

Just being a products what a much by things basis? trying basis and year-over-year sense SKU to of a driven how get on same like is on new look

Kevin Olsen

business the growth growth profile been I softer what be kind the going certainly on seems in the commercial be to you on stronger DIY, of perspective. mean, customers and Yes, seems aftermarket, saying in look does to bit side total if our a there across are from a a what's of based

for Dorman at the parts. DIFM commercial more you look side the indexed of you as house If or towards we're know, Scott, nondiscretionary

new company the that innovation for It's has as aftermarket the solutions. tied mean, now. seem has DIY to the us and will it forward. to continue of growth continues major lever be. in of I the And why the been and be to That focus profile on there out trends to growth X we market not much drivers the so products, major we're new for obviously, be going to and so

Scott Stember

get before I And back into then the queue. next question

signs about in for sense Heavy margin once of a Heavy You to Duty. look when do could of get talked things their hit things again? finally to trying operating stride to start in where we I'm Duty stabilizing margins, go

Kevin Olsen

Heavy XXXX, stabilized, inflect. business. as that the seems certainly it when call be I obviously, an difficult bottom that to We be us, there That not market that be off asset Duty, to hope it mean, to business as market seem or see said see prepared up. our is in to bumping going today. seems light we it's I to as is look, It's the for signs certainly inflection some Specialty you might as Duty remarks, Light

So decreases from it's carry operations. that from volume with obviously they overhead impacted the more manufacturing

innovation and from house productivity going continue that perspective, So initiatives. side in to we're focus on of the our to

we come think So positioned well does that we're market back. when

mid-teen target, that In margins. before the actual terms operating business of downturn was us for generating the profit

that at when does be And expect market to so back inflect. we level the

Operator

Jefferies. Our from Bret the comes of line next with Jordan question

Bret Jordan

segment, guys Specialty space that the the to repair developed much you discretionary opposed line? as fix mix? the about is talk product in you Have how in brake Could now

Kevin Olsen

the a repair, Bret. We're acquired the above we half little ago. XX months nondiscretionary more actually less It than business was than that slightly bit is when business

progress focus As on so. we lot we've That's to because the new are a new and tied we a continue why that vehicle we've to vehicle of previously, high to repair, sales. made nondiscretionary talked rate attach on do initiative, there sales is

to kind going of to will it's focus and So a increase. continue continue that balance sale of be to

Bret Jordan

then complex margins. on question electronics And

Do margin You complex profitable the a Is product exceeds new margin? electronics exceed margins overall? more new the product it product say, obviously, segment that new average. average the

Kevin Olsen

a our in not that aftermarket. margin the what exist a give size it. for the So aftermarket. specifics those margin of been It's around the margin way. Well, It's this okay? the I'll of higher say, we of have means Bret, to I say highest aftermarket the in a that that's aftermarket will customers. new parts is the those profile terms new not are launched in or But for the day mean I we than generally just the or before category highest don't did part it is Which margin lot parts it, us. part to

it's -- is a higher to margin carry or new it's to business. the electronics than mainly going the complex So new the obviously, balance aftermarket, profile of

Bret Jordan

a quick business? guess, obviously, follow-up be do going to then I impacting see if chain. question, that chain guys about increase the big a And do reevaluating some If tariff margin you on supply you we impact. tariffs But next change, there's year, how have see talked supply --

Kevin Olsen

than much that in, watching say, we're obviously better that Bret. were would I now positioned very say we back XXXX. We're closely,

As much I diverse. more -- we're that better I'd is a our we have playbook. chain also referenced, supply think in you say, positioned

do. So we do right handle on we'll the tariffs know business, know the We what's right do for and end ultimate have for our how to for what's right end at of come if our it. what we to customers what's -- We'll and day. user do the do we'll

that's So don't more I happens. to how at point. to this view see I go what it think to watch to and really it. continue we're want We're just into going going

Operator

CJS line next Securities. Our Ages of from comes Justin the question with

Peter Lukas

Lukas Pete for Justin. It's

You covered my a of questions. lot

going of kind seeing where of you terms remarks we And it now? what it future? touched short the parts, what in in know in just in do -- you term? do the of are where of breakdown, in Just prepared kind are see you And vehicle terms the I where the electric going on it today? but see you

Kevin Olsen

plug-in pure Well, by I electric view mean electronic I hybrid. you mean it on vehicles. electric, we think and vehicles, obviously, what depending there's as how

remain park we a the park increase There through prepared the mean, Look, in car I in that pure will for in target it the like repair in XXXX. plug the continued mentioned heavy view hybrid. just is ICE we to electric age car remarks, we going As ICE. and be

capability those to much have so focus there. them invest are any complex address electronics. and that's Hence, out in electric on parts vehicle we We the why of categories. lot A

increase park we'll the So continue repair are there's But some portion the time, our over quite be electric. as categories a time pure before age plug-in to those that car do to of meaningful increase going content. in it's

Operator

Our with next Gary Prestopino question Research. the line of comes from Barrington

Gary Prestopino

the David, that positive income number $X.X what was other million quarter? in

David Hession

was joint that Gary, expense, our that up. and shows income where other the the income. of impact That's On venture

Gary Prestopino

us you here. And could help then, Kevin, out maybe

that margins. the metrics to helping and are or You're new in slap year. how products where growth you what some could were drive terms citing that coming last over -- they last X months increase quarter the from of products new much the maybe But sales in were of percentage around versus

Just so an of the positive get that the idea moving kind is we of how can company? for to

Kevin Olsen

new Gary, we our new sales release terms don't We portion products. release metrics what of dollars do are to in tied the SKUs. of

very As it flattish ago a back the quarter XXXX. comp. in disclosures. you the would they But against I where in roughly in come same in SKUs the X-year to from tell were it were know, actually stack for that you difficult up the SKUs up The last was in was year, was where it year will that a XX% was quarter out quarter

to to applications applications. be So new aftermarket that have the retire, continues extensions, we're -- again, always going look, to line new

versus actually us, the say new are sales to flat break average it's were But a going from SKUs quarter, also continues is that continue going prices number. up, of being specifically growth of same continue going though were aftermarket. the as units new growth be. the quarter to that's is Gary, I'd also the on don't be parts. even driver selling not complex the happen just where to out be we and total product that for up. only And a to we year up but function focus driven in to more the But dollars last to to And the strong

Gary Prestopino

Heavy is back the stabilizing. then you're getting to And the hearing that Duty, market

increase requirements, that in process thought and especially 'XX that versus happened XXXX the for be in what's XXXX? is then will come as XXXX maybe in these in emission flattish the Europe new it in So

Kevin Olsen

right plan at We It's XXXX that released of I in what a not yet, guidance just significant XXXX. point haven't to for that inflection Gary. too going we're this hope say But now. inflect. We on cloudy will to it's do is going growth

development new business. come growth the is product right to focus our new market, productivity product of which is, drive across and So get again, initiatives continue that to will on work to now which into flywheel the years for

So to well when we'll wave positioned up. inflect, it ride does be that

Operator

all question now time. today's That joining, no There's you and you may Thank for disconnect. at concludes further call. this

Dorman Products (DORM) 1 Nov 242024 Q3 Earnings call transcript